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ECON 1 test 3 ch 7
macroeconomics ch 7 GDP & Real GDP
| Term | Definition |
|---|---|
| GDP (Gross Domestic Product) | total market value of all fixed goods & services produced annually w/in a country's border w/in a given yr; geography matters; in calc 0 trade balance, - trade deficit, + trade surplus |
| ways to compute GDP | 1. Income Approach - add the amt of money spent by buyers of final goods & services; 2. Value-Added Approach- add up all the steps; 3. Expenditure Approach- add the amt of money spent by buyers of final goods & services |
| GDP calculation | GDP = C+I+G+Nx (open economy) w/o Nx (closed economy); C = consumers (market basket), I = investments (business spending on businesses ie. labor, construction, etc), G = gov't (spending, not transfers), Nx = (exports - imports) |
| not included in GDP | non-market goods (household prod), underground activities, sales of used goods themselves, intermediate goods, financial trans (trading stocks/bonds), gov't transfer payments (ss cks, vet benefits), leisure (vol time off) |
| final goods | a good in the hands of the final user |
| intermediate good | a good that is an input to the production of a final good |
| double counting | counting a good more than once when computing GDP |
| transfer payment | a payment to a person that is not made in return for goods & services currently supplied |
| consumption | the sum of spending on durable goods, nondurable goods, & services |
| investment | the sum of all purchases of newly produced capital goods, changes in business inventories, & purchases of new residential housing |
| inventory investment | changes in the stock of unsold goods |
| fixed investments | business purchases of capital goods ie. machinery & factories, & purchases of new residential housing |
| government purchases | federal, state, & local gov't purchases of goods & services & gross investment in highways, bridges, & so on |
| government transfer payments | payments to persons that are not made in return for currently supplied goods & services ie. SS benefits & veteran's benefits |
| imports | total domestic (US) spending on foreign goods |
| exports | total foreign spending on domestic (US) goods |
| Net Exports (Nx) | exports - imports |
| national income | total income earned by US citizens & businesses, no matter where they reside or are located |
| national income calculation | the sum of the payments to resources (land, labor, capital & entrepreneurship) = compensation to employees + proprietor's income + corp profits + rental income of persons + net interest |
| capital consumption allowance (depreciation) | the estimated amt of capital goods used up in production thru natural wear, obsolescence, & accidental destruction |
| net domestic product (NDP) | GDP - the capital consumption allowance |
| personal income | the amt of income that indiv actually receive; = the national income - undistributed corp profits, social ins taxes, & corp profits taxes, + transfer pmts |
| disposable income | the portion of personal income that can be used for consumption or saving; = to personal income - personal taxes (esp income tax) |
| Real GDP | the value of the entire output produced annually w/in a country's border's, adjusted for price changes; on x-axis along with output (unless on the cyclical unemp graph then it's on the y-axis) |
| economic growth | increases in Real GDP |
| 3 reasons for true economic growth | 1. more advanced technology, 2. better institutions, 3. new found resources |
| GDP per capita | a country's GDP / the population in the same country |
| GDP & Bads | GDP counts the goods & services, but it doesn't net out air & water pollution, thus some economists argue that our GDP is overstated |
| durable good | goods that are expected to last more than 3 yrs |
Created by:
katt61
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